Investors fear further Royal Mail sale as lock-up expires

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Jitters over lock-up have already weighed on shares, which have fallen 12.1pc since beginning of April

The surge in Royal Mail’s share price in the days after it was floated at 330p drew fierce criticism that the postal service was privatised too cheaply

The lock-up that blocks the Government from offloading more shares in Royal Mail expires on Sunday, raising investor fears the postal service could be hit by a stake sale.

The Government pledged to retain its near-30pc stake in Royal Mail for 180 days after the start of unconditional trading of shares in the group. But the so-called lock-up agreement has now lapsed, giving the state free rein to sell down its holding in the postal company, which could hurt the price of Royal Mail shares.

Nervousness about the lock-up has already weighed on the stock, with shares in the mail company down 12.1pc since the beginning of April.

Royal Mail, which peaked at 615p in mid-January, closed at 495p on Friday night, the lowest level since October, the month of the group’s controversial initial public offering. Worries about a longer-than-expected regulatory review into the group’s access charges also hit the shares last week. However, while investor concern about a possible stake sale has grown in recent days, analysts and bankers do not believe that a placing is imminent. Robin Byde, analyst at Cantor Fitzgerald, said a Government sale would be unlikely during the group’s closed period ahead of its first full-year results as a listed company, which are due on May 22.

Nevertheless, the Conservative-led coalition would be “naturally motivated to sell down state industries,” Mr Byde said, adding that he did expect a placing before the general election. A spokesman for the Department of Business, Innovation & Skills, said: “We have made no decision on a further sale, or any particular timescale. We will continue to monitor our shareholding in the same way as any other responsible shareholder.”


Another analyst, who preferred to remain anonymous, said the Government would be “damned if they do and damned if they don’t” sell shares.

The surge in Royal Mail’s share price in the days after it was floated at 330p drew fierce criticism that the postal service was privatised too cheaply.

If the state sold shares at current levels, it could be criticised for having offloaded them below the record high, the analyst said.

The continuing scrutiny of the float process may also deter a sale. Lazard, one of the banks that advised on the IPO, is due to appear before the Public Accounts Committee at the end of the month.